Munich Re warns the low-rate party will come to an end some time, and insurers may regret some of the risks they have taken on.

Chairman Nikolaus von Bomhard says he is “astounded” at some insurers’ growth strategies.

They may get away with inadequately pricing risks that occur only rarely, but such risks “result in enormous losses when they do” happen, he says.

“In long-tail business, a less conservative reserving policy allows insurers to avoid having to face up to reality for the moment.”

Dr von Bomhard says the phase of lower prices and unrelenting competition will end eventually.

“It is only a question of time before insurers have to shoulder the consequences of their underwriting policies.”

Last week Munich Re announced a half-year profit of €1.68 billion ($2.42 billion), up 13% from the corresponding period last year.

Dr von Bomhard says the company is writing less business in areas where fierce competition has caused severe price drops, and is concentrating on customised reinsurance and innovation.

Gross written premium (GWP) fell 5% to €24.78 billion ($35.67 billion) in the half, mostly due to currency effects.

Property and casualty reinsurance GWP fell marginally to €8.48 billion ($12.2 billion) and the combined operating ratio deteriorated to 94.1% from 92.4% previously.

Munich Re says rates fell significantly in Australia at the July renewals.

The group’s second-quarter profit grew 45% to €765 million ($1.1 billion) on a higher investment result.